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What is a Carbon Fee and Dividend & Take Action

Carbon Fee and Dividend legislation, originally proposed by Dr. James Hansen, Head of Goddard Institute for Space Studies, NASA (U.S.), offers a global solution for effectively shifting to green energy* and green technology**.

What is a Carbon Fee and Dividend?


(excerpted from Citizens Climate Lobby FAQ and adapted for all countries)

A carbon fee is a fee based on the tons of carbon that fossil fuels such as oil, gas and coal generate.  The fee would be collected at the point of entry – well, mine or port.  The fee would start out low and gradually increase annually in a predictable manner until green energy is competitive with fossil fuel.

A dividend is defined as a quantity of revenue to be divided.  In this case, 100 percent of the total carbon fees collected are divided up and given back to all citizens equally.  This dividend helps citizens pay the increased costs associated with the carbon fee while a nation transitions to a clean energy economy.

This helps to reduce emissions, because the fee (and the price of fossil fuel) rise predictably over time, which sends a clear price signal to begin using fossil fuels more efficiently and/or replace them with green energy.  Investment flows to green technologies and the rising cost of fossil fuels increases the demand for these products, making them even less expensive as they reach mass production.  This clear, easy to understand price signal – increasing fossil fuel costs and decreasing green technology costs – drives the transition to a green economy.  

From a business standpoint, by giving the entire carbon fee back to the citizens – the end users – consumers will be able to pay the higher prices of goods and services caused by the higher price of fossil fuels. This allows businesses to pass along the increased cost and keep market share.  Each year the carbon fee goes up, the dividend goes up as well.  Everyone is on a level playing field for the first few years.  But if businesses do not become more energy efficient and start converting to green energy they will become less competitive and lose market share.  These market forces will drive innovations in green technology, creating new business opportunities to develop, produce, install and service these products. This will create new jobs and make companies more energy efficient, making them more competitive worldwide.

From a citizen standpoint, with Carbon Fee and Dividend (CFD) legislation, it is clear to citizens that fossil fuels will go up every year. They will be motivated to save as much of their dividend check as possible rather than spending it on more expensive fossil fuels.  They can do this by changing over to energy efficient lighting and appliances, upgrading their insulation or windows, replacing energy inefficient furnaces, switching to green energy sources, buying plug-in hybrid or all-electric vehicles, etc. 

To protect local manufacturers, CFD legislation places a border adjustment levy on all imports from countries that do not price carbon similarly, leveling the playing field for local companies.

To protect local exporters, CFD legislation rebates the border adjustment fee to local companies exporting to countries without similar carbon pricing, leveling the playing field for local companies.

This legislation forces exporting countries to either adopt similar carbon pricing or pay to export to countries with these programs.  All countries that adopt similar fees on carbon are on the same level playing field and can make border adjustments with countries that do not adopt such fees.  This encourages all countries to place similar fees on carbon.  As more nations adopt carbon fees, worldwide demand brings the best green technologies to mass market faster, driving down costs and making the transition to a green economy less expensive for everyone.

Carbon Fee and Dividend legislation is very transparent, easy to understand and fair to all parties making it more likely to achieve the intended goals of lowering total CO2 levels while transitioning to a green economy. 

What are the benefits of addressing climate change through Carbon Fee and Dividend legislation?

  • Reduces CO2 levels in the atmosphere back down to 350 ppm or less, stabilizing our climate and oceans and slowing down the mass extinction of species.
  • Encourages all countries to adopt the same carbon fees through border adjustment levies.
  • Encourages companies and individuals to become more energy efficient.
  • Drives green technology innovations.
  • Increases locally-sourced green energy which reduces international conflicts.
  • Creates jobs researching, manufacturing, exporting, installing and servicing green technologies.
  • Reduces air pollution (i.e., smog, ozone, fine particulate matter and other pollutants caused by burning fossil fuel). 
  • Reduces water pollution (i.e., mercury poisoning caused by burning coal, toxins leaking from tailings ponds from coal/tar sands mining and salt brines from drilling).

* Green energy (also know as clean energy): energy produced by renewable sources – solar, wind, wave, geothermal – that do not contribute to total greenhouse gas emissions.

** Green technology: any technology that reduces waste, increases energy efficiency, or produces low- or no-carbon energy.  By reducing waste you actually save energy.  Energy efficient technologies include Light-Emitting Diodes (LEDs) and Compact Florescent lighting, energy efficient appliances, efficient building design, high efficiency windows, plug-in hybrid and all electric cars, etc.

Take Action


To encourage your elected officials to implement Carbon Fee and Dividend legislation (sample Bill), write them a personal letter. Below are some suggestions for the letter (excerpted from a Citizens Climate Lobby action and adapted for all countries):

Ask them to introduce or support legislation that will:

  1. Put a steadily-rising fee on carbon-based fuels at the first point of sale.
  2. Return revenue to households to offset higher energy costs.
  3. Impose tariffs on goods from nations that do not have similar carbon pricing in order to protect businesses.

Talking points

  • A predictable, steadily rising fee on carbon sends a price signal to investors that clean energy will be more profitable than fossil fuels in the future, creating the economic incentive for a shift to renewables.
  • As the private sector steps in to invest in solar, wind, geothermal and other clean energy, our government can gradually phase out subsidies for ALL forms of energy.
  • Exxon, Shell and BP have recently expressed support for a clear and predictable price on carbon that will reduce greenhouse gas emissions.
  • The International Energy Agency has warned that we have a window of 5 years to start reducing greenhouse gas emissions before we lock in the infrastructure that allows CO2 to reach unmanageable levels.
  • The assumption that we must choose between the economy and a safe climate is false. A carbon fee that returns revenue to households will actually stimulate the economy and spur job growth in the clean tech sector.
 

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